Is CSGP Stock A Buy or Sell?

In this article we will check out the progression of hedge fund sentiment towards CoStar Group Inc (NASDAQ:CSGP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is CSGP stock a buy or sell? CoStar Group Inc (NASDAQ:CSGP) investors should be aware of a decrease in support from the world’s most elite money managers lately. CoStar Group Inc (NASDAQ:CSGP) was in 51 hedge funds’ portfolios at the end of December. The all time high for this statistic is 55. Our calculations also showed that CSGP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Charles Akre Akre Capital Management

Charles Akre of Akre Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With all of this in mind we’re going to take a look at the key hedge fund action surrounding CoStar Group Inc (NASDAQ:CSGP).

Do Hedge Funds Think CSGP Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CSGP over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Akre Capital Management was the largest shareholder of CoStar Group Inc (NASDAQ:CSGP), with a stake worth $892.8 million reported as of the end of December. Trailing Akre Capital Management was Alkeon Capital Management, which amassed a stake valued at $362.4 million. Bares Capital Management, Pelham Capital, and Select Equity Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to CoStar Group Inc (NASDAQ:CSGP), around 12.36% of its 13F portfolio. Center Lake Capital is also relatively very bullish on the stock, dishing out 11.66 percent of its 13F equity portfolio to CSGP.

Due to the fact that CoStar Group Inc (NASDAQ:CSGP) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of funds who sold off their full holdings in the fourth quarter. Intriguingly, James Parsons’s Junto Capital Management sold off the biggest position of the 750 funds monitored by Insider Monkey, totaling close to $64 million in stock, and Ravi Chopra’s Azora Capital was right behind this move, as the fund cut about $6.1 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds in the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks similar to CoStar Group Inc (NASDAQ:CSGP). We will take a look at Agilent Technologies Inc. (NYSE:A), General Mills, Inc. (NYSE:GIS), Xcel Energy Inc (NASDAQ:XEL), The Travelers Companies Inc (NYSE:TRV), DexCom, Inc. (NASDAQ:DXCM), Aptiv PLC (NYSE:APTV), and Parker-Hannifin Corporation (NYSE:PH). This group of stocks’ market values are closest to CSGP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
A 45 3507911 6
GIS 39 952845 3
XEL 28 289526 6
TRV 34 405824 -1
DXCM 52 1664615 -6
APTV 44 1354021 6
PH 56 1601655 5
Average 42.6 1396628 2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.6 hedge funds with bullish positions and the average amount invested in these stocks was $1397 million. That figure was $2882 million in CSGP’s case. Parker-Hannifin Corporation (NYSE:PH) is the most popular stock in this table. On the other hand Xcel Energy Inc (NASDAQ:XEL) is the least popular one with only 28 bullish hedge fund positions. CoStar Group Inc (NASDAQ:CSGP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSGP is 69.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately CSGP wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on CSGP were disappointed as the stock returned -11.4% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.